Joint-Nordic imbalance settlement for the electricity market launched

The joint imbalance settlement for the Finnish, Swedish and Norwegian electricity markets has been launched at the beginning of May. The joint imbalance settlement will boost the electricity markets over national market boundaries and is a step towards deeper integration of Nordic electricity markets. This cross-border cooperation in imbalance settlement is the first in all of Europe. From now on, the imbalance settlement is carried out by the service company eSett Oy, jointly owned by the transmission system operators and based in Finland.

The goal of the joint imbalance settlement is to guarantee uniform, efficient operating conditions for the Finnish, Swedish and Norwegian electricity markets, regardless of country or bidding area. A uniform, centralised operating method boosts the operations of balance-responsible parties*), distribution network companies, electricity suppliers and service providers, as well as the countries' transmission system operators Fingrid, Svenska kraftnät and Statnett.

The new operating model also promotes progress towards a joint-Nordic, end-user market of electricity by facilitating the entry into the market of new electricity suppliers and other industry operators, as well as the expansion of their operations into other Nordic countries. The goal is to boost market operations and to provide consumers with more options.

Power balance must be maintained at all times

Each seller and buyer operating in the electricity market must take continuous care of its power balance, which means that they must plan and maintain the balance between the acquisition and delivery of electricity. Due to errors in forecasting, the accurate maintenance of the power balance is not possible at every moment. With the help of balance services, an electricity buyer or seller can balance the difference between acquisition and delivery with so-called imbalance power. A party using more electricity than estimated pays extra for its electricity, and a party using less is compensated. A well-functioning balance service is a key part of a functional electricity market.

Traditionally, imbalance settlement is carried out as a national service. In the Nordic countries, the transmission system operator of each country is responsible for arranging the balance service. The Nordic countries are now providing an example for Europe on increasing regional integration. In 2013, Fingrid, Svenska kräftnät and Statnett established a joint service company, eSett Oy, to carry out imbalance settlement on the electricity markets with uniform operating principles on behalf of the transmission system operators.

Companies which have an agreement with eSett act as so-called balance-responsible parties, which serve other market operators. The task of balance-responsible parties is to estimate, in advance, how much electricity parties covered by their service will produce and consume, strive to balance this situation, and then settle power balances with eSett.

Pioneering project in all of Europe

"Building a uniform imbalance settlement model has been a pioneering project on the level of all of Europe and the EU. It's been fantastic to participate in building imbalance settlement operating on joint rules and creating a basis for larger market development. Credit for the completion of the model also goes to all electricity market parties; without them, we wouldn't be here," says Minnakaisa Ahonen, eSett's CEO.

"Now, we serve over one thousand electricity market operators in three Nordic countries. However, we think that this is only the beginning. Our goal is to further develop the imbalance settlement model in close cooperation with our customers and transmission system operators," she continues.

"The Nordic countries are again showing the way for all of Europe. A joint balance service is an excellent example of how cross-border cooperation for functional electricity markets can be carried out in the Nordic countries in a practical manner, without heavy regulation. We are also proud that we can offer the service from Finland and promise to support eSett's operations in every possible way," states Fingrid's President and CEO Jukka Ruusunen.

*) A balance-responsible party is a company with an imbalance settlement agreement with eSett and a balance management agreement with a transmission system operator. The balance-responsible party is responsible for the power balance for itself as a producer, consumer or seller of electricity, or on behalf of other producers, consumers or sellers of electricity.